Unauthorized waiver adds millions to N.C. Medicaid costs

In August, the state’s Medicaid director asked the federal government for permission to postpone for three months the process for renewing Medicaid recipients’ coverage.

The federal government gave its approval, but the N.C. General Assembly didn’t. When lawmakers passed the state budget in July, they required the Department of Health and Human Services to get legislative approval for federal waivers.

Rep. Nelson Dollar, the top budget writer in the state House, said he only learned about the waiver last month. While he’s concerned that the Department of Health and Human Services failed to consult the legislature as the law required, Dollar said he’s more concerned about the cost of the waiver.

“It’s very substantial,” Dollar said. “It could be in excess of $10 million.”

Some estimates peg the cost as high as $40 million.

The waiver is one of several problems to be discussed Tuesday at a legislative oversight hearing of the department. The department has run into repeated problems with its new Medicaid claims processing system. The department has failed to provide the legislature with reliable data for budgeting the Medicaid program. Nor has it made reliable data available to the agencies and organizations that seek out Medicaid fraud or high-dollar patients who can be treated in cheaper primary care settings rather than expensive emergency room visits.

The DHHS request to postpone the Medicaid renewal process for three months dates back to the 2010 Affordable Care Act. The federal government published new rules in March 2012 that revised the formula for calculating Medicaid eligibility. The department does not have the new rules in place.

The $10 million in increased costs would come from continuing medical coverage for people who are no longer eligible; a Medicaid recipient may land a job, for example, and get insurance that way.

A litany of problems

Carol Steckel, the former Medicaid director who requested the waiver, did not return phone calls Monday for comment. She resigned in September to work for WellPoint, a managed care company. DHHS did not respond to questions about the waiver.

DHHS officials did not respond to requests made Monday morning for an interview or comment. Democratic lawmakers have called for DHHS Secretary Aldona Wos’ resignation because of problems in the department. Gov. Pat McCrory has expressed confidence in her leadership and says that his administration inherited the problems from previous Democratic administrations.

Medicaid is one of the biggest insurers in the state, covering low-income children and their parents, the elderly, and the disabled. The state spends about $13 billion on Medicaid each year – about two-thirds of the money comes from the federal government – covering 1.7 million recipients.

The waiver is just one of many issues facing DHHS under McCrory. The department has been struggling to fix a backlog in food stamp applications so severe that the U.S. Department of Agriculture threatened to cut off funding.

The department has run into repeated problems trying to get its new Medicaid claims processing system to run correctly. The program, known as NC Tracks, ran into trouble as soon as the state started using it on July 1.

NC Tracks’ flaws have been chronicled in state audits, news reports and medical workers’ comments at legislative hearings.

Much of the attention on NC Tracks has focused on problems in its front end – paying doctors, hospitals and other health care providers for their services. Last month, a group of doctors sued the department and a software vendor over the failure of NC Tracks to pay claims.

But there are significant problems for agencies that need Medicaid data to do their job, whether crafting budgets or detecting Medicaid fraud. The department was originally scheduled to have a Medicaid claims database up and running by Oct. 15, a deadline that has yet to be met.

Robin Pendergraft, who heads the Medicaid fraud unit at the N.C. Department of Justice, said her investigators cannot pursue any cases that developed after last July 1.

“We are not utilizing any of that data,” Pendergraft said. DHHS “had indicated to us that there are concerns about the reliability of the data from July 1, 2013 to the present.”

Just as the Department of Justice needs reliable data to investigate cases, the Program Integrity unit at DHHS needs the data to identify billing irregularities. Community Care of North Carolina, a nonprofit network of health care providers, uses the data for, among other things, identifying medical “frequent fliers”: patients who make repeated and expensive trips to emergency rooms when they would receive better treatment at lower cost from primary care doctors.

CSC, the Virginia-based company with the $484 million contract to design and implement the claims processing system, declined to answer questions Monday, as did Truven, the company hired to maintain and analyze the Medicaid claims database.

Error could hurt budget

One of the biggest consumers of Medicaid data is the General Assembly, which needs accurate and reliable data when drafting the state budget. Because Medicaid is a $13 billion program, a 1 percent error means a difference of $130 million. Even though much of the funding comes from Washington, an error in projecting North Carolina’s share can create havoc in the state budget.

This year’s budget, for example, has not set aside any money to cover the costs that will result from the waiver that was requested in August without legislative approval.

Moreover, it would be virtually impossible to craft a Medicaid budget with the claims data available today, said Dollar, the House budget writer.

“That would be a very significant challenge,” Dollar said. “We do not have the data today that we need to budget appropriately.”

DHHS said it hoped to have the problems with the data warehouse worked out by March.